Finding Joy in Deere

Deere (DE) just doesn't know how to tell the story. It happened again. The quarter looked terrific. The forecasts got boosted.

Each division excelled. Construction and forestry equipment, a business line that had been so negative, turned incredibly positive. Net sales increased 26% and operating profit expanded 13%. Worldwide agriculture and turf jumped 11% in sales and 21% in operating profit.

Farmers are flush and the company is expanding to meet their demand. The Commonwealth of Independent States and China, two growth markets, appeared to be terrific. It was, quite simply, at terrific quarter.

So what happened? As we have seen so many times with this stock, it traded up huge before the market opened, and then Deere just took itself to the woodshed.

What did they do this time to hurt themselves? Management cut their U.S. Commodity Price Estimates from bountiful levels to bearish levels that took my breath away.

Nothing's more important to the farm economy than corn. The company had previously forecast that corn will plummet in price from $5.30 per bushel -- already down big from where it is now -- to $4.85. What a nightmare. Deere dropped its 2012-13 wheat forecast from $6.70 to $6.25.

These are devastating cuts. They are basically calling the top in crop prices and we look to those prices to increase if we want Deere's stock to increase.

Of course, there is some terrific joy to be had from this forecast. If you own steer, you are rejoicing. This news is great for everyone from McDonald's (MCD) to Chipotle (CMG). If you buy chicken wings in bulk, as Buffalo Wild Wings (BWLD) does, you have some great news here, too. Whole Foods (WFM), Panera Bread (PNRA) are winners, as are companies like General Mills (GIS) and Pepsi (PEP).

But for Deere, the company has now set a high watermark for the cycle. When bumper crops damage pricing, it's really tough to believe we will see better pricing for farm equipment in 2012 and 2013. Now, I think Deere is being too negative, as is often their way. However, there is no denying (as the Agricultural Secretary said on "Mad Money") that agricultural prices are moderating.

My take: You can't own Deere. The company shoots itself in the foot way to often and it doesn't pay a big enough dividend to warrant your investment. But if Deere's right, a ton of consumer packaged goods companies and restaurants are about to get some real commodity relief.

Now that, plus the decline in gasoline and the soon-to-plummet prices in plastics owing to low natural gas prices (the key feed stock), means a remarkable resurgence of the consumer could be right around the corner.

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